How subscription boxes are winning the D2C retail game

Millennials are known for their fondness of e-commerce, quick and free delivery, and extreme customization. While Millennials are in part to blame for the success of e-commerce sites, they have also had another staggering effect on retail: they’ve helped grow the subscription service segment.

According to research conducted by Vantiv and Socratic Technologies, 92 percent of millennials pay for one or more subscriptions. While gyms, magazines and streaming TV services rank high on the list, many D2C companies are also winning the hearts of millennials.

But not every company can experience the success of Dollar Shave Club. In fact, dozens of subscription companies have folded in recent years. Here are three reasons that subscriptions are popular (and successful) amongst millennials:

Ease of fulfillment
Most millennials are young professionals and just hitting stride in their careers. This means they’re busy but also have more disposable income than generation Z. Combine these factors with the ease of online shopping and you have a generation that’s eager to purchase subscriptions. That being said, subscription companies must allow the consumer some control. In a study conducted by Fluent, researchers found that while millennials were more likely to have subscription boxes, they also prefered an option to skip a month. “Many men and women do not want a recurring subscription; allowing customers to skip months is a great way to help people feel in control and not inundated with products they might not have time to use,” the authors wrote.

Reduced Prices
A main advantage to the consumer is reduced prices for subscription boxes. Just like traditional direct-to-consumer companies, most subscription boxes can offer lower prices because they aren’t using a middle man to reach the customer. Furthermore, sample boxes such as Ipsy (beauty products) are able to offer $10 boxes that contain a value of $50 in products. One way Ipsy has done this is to establish themselves as trendsetters in the beauty industry. Through a program that supports and promotes beauty bloggers, Ipsy is at the forefront of what’s hot in cosmetics. Brands actually pay Ipsy to put samples in their “glam bags.” This acts as a form of advertising for the brand and also ensures further exposure from the beauty bloggers. Consumers win by paying a reduced price for premium samples as well as full-sized products.

Customization
Possibly the most important aspect of subscription boxes is customization. Many of the companies that have folded were unable to keep up with individualized demands. Millennials want the ease of subscriptions, but they also want something suited to their unique needs. Companies such as Stitch Fix offer completely custom and curated boxes. Again, Ipsy excels at this by collecting customer data and using it to customize boxes each month. Speaking of their customization, Marcelo Caberos tells Fast Company: “From the very beginning, we wanted Ipsy to be a personalized beauty service.” He adds, “but this proved much harder than we expected. It’s a difficult mathematical challenge, but also one that involves knowing about each individual beauty product.” The way that Ipsy solved this challenge was to hire a former Netflix researcher to head a team on personalization. This team takes all the data Ipsy collects on their 2.5 million customers and matches it to products. The result is that Ipsy leads the pack in number of subscribers.

While you may not have 2.5 million customers just yet, using your data to create value for consumers is key to compete in today’s retail environment. Whether you’re offering a subscription or just a really great product, you need to find the right formula to deliver a personalized experience and relevant content to your customers. This will take a lot of research and data analysis, but your bottom line will thank you.

If you’re ready to speak with someone about how Ironbridge can help you make sense of your customer data, click here.

Written by Kim Kelly Consulting

About Ironbridge Software

Ironbridge Software was founded in 1989 by Mike Dickenson. Mike’s unparalleled expertise and passion for technology led him to create the first-ever analytical solution for the Consumer Packaged Goods Industry.

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Do you ever consider changing up your business model? Want more accurate data insights to help you make decisions big and small?Contact Ironbridge today to learn more about our suite of products.
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